FinTech Wealth Management Companies: A Characteristic of the Modern Financial Climate

In our current digitally-focused era, the technological progress of businesses interested in BaaS offerings is tightly intertwined with their ability to adapt to market changes and follow the latest security protocols active in the industry. Banking-as-a-service is a flexible and cost-effective business model that is closely followed by more and more organizations targeting the national or international financial sector. Its core principles are quite simple.

In order to have a chance at widespread adoption and increase profitability and market share, the services and products commercialized by profit-focused companies need, foremost, to be accompanied by financial services with a focus on enhancing the customer experience. Sure, BaaS is primarily associated with organizations that want to enter the financial sector without investing significant sums in their internal technological infrastructure, like FinTech wealth management companies. However, for private ventures interested in market recognition and profitability increases, BaaS can provide clients with a streamlined transactional experience that will make it easier for them to finance, rent, or purchase your services.

A Financially-Advantageous Proposition

Through the integration of bank-like services, like digital wallets directly in the platform used by your business, your service and product offering might get expanded and have a direct effect on your quarterly profitability forecasts. BaaS can enhance the services provided by your private organization, make your brand gain increased recognition in your activity sector, provide the analytical data necessary for down-the-road economic plan adoptions, and help you closely follow the AML and KYC regulations active in your sector.

Nevertheless, the most significant benefits of BaaS are reserved for organizations that want to offer financial services to private investors and market-present firms. Let’s say, for example, you are interested in becoming part of the countless FinTech wealth management companies active in the US. For this scenario, BaaS will allow your venture to benefit from the technology necessary for banking operations without needing to obtain a banking license or invest heavily in internal infrastructure. Plus, BaaS offerings are integrable with APIs and can be utilized to ensure regulatory compliance with AML and KCY legislation.

What Are the Benefits for Companies Interested in This Medium?

Are you looking to enter the ranks of the countless internationally renowned FinTech wealth management companies active in this country? Do you want to offer bank-like financial services to national or global clients? Are you interested in wealth management tech? In such a case, BaaS might represent the best solution to put your vision into motion and enter the financial sphere without committing to significant monetary investments.

In Banking-as-a-service, especially if you plan to enter the ranks of the FinTech wealth management companies active in the country, you leverage the existing infrastructure of nationally-present companies, which can be a significant advantage, as the providers of these services will deal with everything, from the maintenance of the internal technological infrastructure to the implementation of the operations necessary to keep in line with market data-protection and fraud prevention regulations.

In other words, in BaaS, you outsource the technological infrastructure necessary to offer financial services without necessarily having the resources to build them yourself. BaaS often works as a pay-as-you-go subscription model that can be seamlessly integrated with the rest of the services provided by your website/digital platform. On top of that, BaaS is flexible, can be adapted both to the requirements of private capital organization and wealth management tech companies, can open up new avenues for external revenue generation, and the platforms that offer it are quick to adapt new technologies or financial products, like Crypto or ESG lending.

What Are the Regulations That Must Be Followed?

Most companies present in the wealth management tech sector outsource at least a part of their internal technological infrastructure from external BaaS providers. The benefits are two-fold. On the one hand, leveraging BaaS is significantly cheaper than building the infrastructure necessary for financial services from scratch. Secondly, you will not have to worry about the anti-money laundering regulations active for companies involved in the EU or US financial markets. What regulations? Let’s start with the EU. Businesses that want to offer private financial services (like lending or credit cards) in the European Union must keep in line with the provisions laid out in the General Data Protection Regulation and follow the AMLDs. Like in the US, EU-present businesses active in the financial sector must monitor the transactions happening on their platform, verify customers, and leverage SCAs. These measures are overseen by the EBA. However, unlike in the US, their enforcement is carried out by national financial authorities (such as BaFin in Germany). In the US, companies active in the wealth management tech sector must follow the provisions of the BSA Act, report all cash transactions over $10,000 to FinCEN within fifteen days after the transaction is identified, and collect the identifying information of customers opening new accounts, per the requirements of the USA PATRIOT Act of 2001. The fines for not following these regulations can be significant. In the EU, for example, Commerzbank had to pay a €45 million fine in 2020 for not complying with the British FCA’s AML audits. Additionally, in the same year, Goldman Sachs was fined in the US, with almost $4 billion for its involvement in the 1Malaysia Development Berhad scandal.

What Services Can FinTech Wealth Management Companies Provide?

Let’s say you are not interested in transforming your firm into a wealth management tech-focused organization, but you are instead keen on utilizing the financial services of such a platform. In that case, the benefits of the company you choose will be determined by the characteristics of your investment profile and the financial resources you possess. For one second, let’s assume you are a private investor, and your primary goal is to diversify your portfolio. For your case, wealth management firms can aid in your pursuit of greater monetary returns by leveraging robo-advisors that can determine the risk score of your investments and design personalized investment plans in accordance with your subjective risk tolerance.

Robo-advisors are significantly cheaper than the professional expertise of humans, can automate the vast majority of tasks like DRIPs or income reinvestment, streamline the generation of financial reports, and are focused on long-term profits, as their utilization often leads to generous returns. The platforms provided by wealth management tech-focused companies that leverage robo-advisors are available both on desktops and mobile devices, make use of complex data-driven analytical insights when determining the risk score of user-presented transaction opportunities, and don’t require a significant financial commitment, as the barrier of entry is typically lower than is the case for conventional investment avenues.